Bitcoin: Investor, trader, gambler or idiot?

In the last few months we’ve received inquiries from several about Bitcoin and various similar things, often referred to as cryptocurrencies. In essence many of these folk are the ones who missed out on making millions by not buying a few Bitcoin when it was dirt cheap. Now, they don’t want to make the same mistake so are looking around for a second chance. You can’t blame them of course – if the missed opportunity for financial freedom slapped you in the face when Bitcoin hit $USD 22,000 at peak in December 2017, that’s bound to be a wake up call. If they had bought $100 worth of Bitcoin years ago, they would have been sitting on….. at December 2017? If that’s you, cry now! 

These second-chance folk are making the same fundamental mistake. Firstly, they were asleep back then (- and they are still asleep). Then when they began to see price movement many ‘knew‘ it was gonna crash. They had no methodology to determine an optimal entry point and an optimal exit point. So what’s gonna happen now? People who missed the first big pump on Bitcoin are gonna jump in because they don’t want to miss out. They ‘know‘ that there is another big move up. How? Because Google picks up loads of people chuntering about Bitcoin reaching between $100,000 and $500,000 in the next 10 years. Driven by the herd instinct – unknowingly – they come to a position that if everybody is saying the same thing then they must be right. Stupid!! Stupid! and Stupid!

But then they don’t want to feel more stupid – like before – when they didn’t follow what everybody was saying between February 2017 and December 2017 (the main pump period). So now they’re thinking, “Well, if I was stupid back then, I don’t want to be stupid again and not follow the crowd.” Who is this crowd? They’re largely a bunch of idiots! They have no methodology for assessing where a trend is actually heading. They know nothing about analysing price movement for trends, finding the optimal entry points, exit points and limiting loss. All they know is that, “There’s never a right time.

Well if you’re expecting me to say what’s the right thing to do, you’ve just wasted your time. This site has been very clear that we don’t ‘give the word’ or advise or predict anything. We don’t teach or counsel anybody. Instead all you get is our sheet below (clickable) where you can categorise yourself if you so wish – and at your own risk. 

DISCLAIMER:
The information provided herein is opinion only. Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of investment. You are responsible for your own due diligence. To summarise, we do not provide investment advice, nor do we make any claims or promises that any information here will lead to a profit, loss, or any other result. All materials are for educational purposes only. We are clear in our SYP.

 

Is Parabolic Mayhem ahead?

On Tradingview I’ve put up a Vlog about this which is embedded below. I say what I see. I’m focusing on the form of movements of the US30 compared with the correction on the parabolic Bitcoin. The evidence is there, which I think everybody can see. Just to be clear nothing in this post is a prediction or recommendation. See our SYP disclaimer.

The following vlog is downloadable or viewable in larger format on Tradingview.



Is a financial crisis ahead? by Captain_Walker on TradingView.com


DISCLAIMER:

The information provided herein is opinion only. Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of investment. You are responsible for your own due diligence. To summarise, we do not provide investment advice, nor do we make any claims or promises that any information here will lead to a profit, loss, or any other result. All materials are for educational purposes only. We are clear in our SYP.

Courses, horses – or the mind?

If you’re reading this looking just for the best course to attend, you may be disappointed. I go deeper than the simple issue of ‘which courses‘ or ‘what course is best’.

Introduction

I’m sharing a summary of my experiences over the last 4 years, so that others can see something more about ‘courses’ – and what courses can never give you.

I am nobody known or big in the trading world. I do not offer advice in this or any other post. I do not train anybody. I do not seek anybody’s money for any service. I do not require recognition. Take all of what’s written here as ‘what I’ve learned‘ and cautiously apply the parts of it that you find of any value. Where I use words like ‘you’ and ‘yours’, this is my self-talk as if I’m advising myself all over again. I do this all the time. You’re not mad if you’re doing self-talk. It is an important thing to do.

I started off with binary options and lost a fair amount of money. I watched numerous videos on YouTube about how to trade these, with numerous so-called successful strategies. In my searches I came across Spreadbetting, and did the same. More money lost. I then signed up with various trainers and spent more money there. More losses. I’m to blame I was led to understand because I didn’t follow the rules. That’s true to some extent – but something fundamental was missing. Why could I not follow the rules of some strategy invented by others? It’s about why this post is in the Trading Psychology section of Tradingview.

I followed various gurus on websites, paid more money and still no success. Most of these gurus had state of the art audio-visual equipment and studios. They usually appeared with large microphones, conspicuous and ‘in the face’. Is that really necessary? Some will say it’s all about better sound quality.

Then I got into ‘trading diaries’ and other things people out there said I should do. Still major problems.

So, what was missing? To put it in a nutshell the problem was grappling with my personal psychology. This is about the way I work – how my mind functions in relation to risk, which would be different to everybody else. Psychologists may be able to tell you a bit about how minds in general work. They cannot tell you exactly how ‘your mind’ works.

Gurus?

Most of the gurus I came across would mention psychology several times but never get to the heart of it. Naturally they’re not psychotherapists, so they can’t tell me how to sort myself out. Most trainers focused on ‘discipline’ which is fine, but they couldn’t tell me how to become disciplined. What? – am I just supposed to pull myself together and follow a script? Some would say ‘yes’. But this is not how the human being operates. If everybody could just pull themselves together and follow a trading plan and a set of rules, then everybody would be rich. Come on – we all know that’s silly.

Three people became important: 1. Mark Douglas and 2. Dan Zanger around 2015.  In the last year Charlie Burton. [And I’ve never met these people].

Recognition

So, recognising that the core stumbling block was my individual psychology, I went my own way. I needed to find out “Who am I? How do I tick?” – in trading environments.  What are the psychological factors that affect me in trading? What is my mindset? Individual psychology includes anything to do with the functioning of my mind. No – this is not simple ‘soul-searching’. I went deeper. I looked deep inside at my fears, my thinking processes, my biases, and things that influenced my mind. The latter group, I categorise as ‘the enemies’. I set up my own blog which became a diary of my thoughts, learning, experiences, mistakes and explorations. This is not intended to attract followings. I shared it on the web so that it might benefit anybody who wanted to dig as deeply as I was digging into myself (as I still do). All this stuff is well “Beyond Technical Analysis” – which is the group-category of this post.

On my path of discovery of myself interacting with ‘the trading world’, I also came to appreciate that many of the trainers out there – and I have no exact percentage – aren’t as profitable as they make out to be. The true experts out there – few and far between – estimate that about 80% of trainers are not actively trading [ref: Charlie Burton and others]. It makes sense really – if you could hook a fluid pool of 500 people at say $1000 per year, you don’t need to do much trading. It’s just easier money. Did you get that? It’s a cool $500,000 per year! My experience is that many trainers-to-be started off by offering free materials – then lo and behold – several months later, they set up and started charging for some sort of ‘inner circle’ access. This must mean that it’s good business. If you’re making millions in trading do you really need to take even $100,000 per year in helping other people? I’d do it for free – but be very selective.

What are these sorts of trainers and course providers selling? I won’t go much more into this as I’ve summarised it here: Dreamers exploited and New traders conned. I’m not saying that all trainers are conmen. What I am saying is that it’s such lucrative business that the chances of finding a good trainer are very small. But – no trainer that I know can help you unravel and fix your personal psychology as it relates to trading environments. They may give you a few tips here and there, point out some biases, problems with your application of methodology and so on. At the end of the day it’s you and you alone to sort yourself out. That’s what I realised.

Methodology and strategy

What about methodology or strategy? There are problems here. There is no magic formula. The magic I’ve discovered is matching a methodology to one’s individual psychological characteristics. Why? How? There is only so much you can do to wrestle with your psychology in a world where there are no ‘markets psychotherapists’. So, it had to be about finding a system – a methodology – that fits my  personal psychology as I made changes there. That was a process of trial and error, or discovery if you like. It takes time, experimentation, persistence, determination and so on. Ideally, finding the fit ought not to have come purely by interaction with the markets in a live trading environment. I learned the hard way – and paid for it with serious losses. Live trading accounts are a different ball game, it is where one’s psychology is truly tested and where one is punished mercilessly. It’s no bad thing to suffer some limited affordable losses in live trading to be woken up as to how much more work one needs to do on one’s own psychology.

I return to Dan Zanger, who after suffering for about 6 years in his own words, ‘The penny dropped’. Zanger read only two books. He was an average guy who refused to give up. He went into margin call etc. Read about it. Zanger is inspirational for me. I had to ask myself a simple but important question, ‘If Zanger can, why can I not?‘ Anything that fell into ‘not’, I had to work on.

Am I saying that I’ve reached the promised land? I am not. There is no promised land. I’m still on a steep learning curve – largely about how my mind works, and how I control the ‘enemies within’.

Mind and psychology

The issue of personal or individual psychology is often neglected among new traders who are largely too hungry to make some big money in quick time. Many hit a wall early or late – a wall that is hard to see or feel. It’s terrible. It’s like your liver i.e. you may know you have one, but you don’t really know what it’s doing. You could read about how livers work but you don’t know what ‘your liver‘ is actually doing. So too – you have a mind. You can read about the functioning of minds from psychology texts but do you know what your mind is actually doing in respect of trading environments? I might have thought that I did. I didn’t. The reality is that I see only the outputs of my mind, I see its mistakes after they are made. That realisation came only through a process of painful reflection. I began to discover the trickery of my own mind. And my mind still pulls many tricks on me daily. But parts of me – in that same mind – are growing stronger, to catch the other parts that would cause trouble.

In theory I could have been more cautious about courses and gurus. Hindsight is always 20:20. It’s a ‘world’ where there are too many traps with people selling dreams and covertly occupied with fattening themselves. I really couldn’t have known. Reaching the ‘wall’ was no bad thing. I had to grope in the dark to discover its features, that were actually part of me.

Pattern rewriting

This is not about patterns on charts. Think ‘patterns in the mind’. Are we truly aware of our patterns of thinking and behaviour in trading environments? I think not (in general). Even if we are aware of them how much control can we exert to change those patterns? How much effort does it take? No this is not just about hatching discipline. So, I had/have to discover patterns in my thought processes, and emotional reactions that might imperceptibly influence those thought processes.

Yes – I could spot individual mistakes but finding patterns of mistakes that burn money was/is not easy. Why is this important? Because I discovered that stamping out a single mistake in the mind does not bring profitability. The true issue is about patterns of mistakes in the mind. This is about finding a ‘meta-perspective’ on my own mind. It is like re-writing the ‘machine code’ of my own mind. I was working against all that from an evolutionary perspective, was hard wired into my brain. I had/have to rewrite a set of subroutines to fight with millions of years of nature’s prime purpose (i.e. survival), which is not about my profitability in trading.

If I could turn back time

If I had to do it again all over – what would I do, with the benefit of hindsight?

  1. I’d blow up more demo accounts – 5 is sometimes not enough.
  2. I’d dig deeper earlier on into my personal psychology.
  3. I’d defocus from the promises of those who teach technical analysis. [I’m not saying it’s not important.]
  4. I’d avoid going into a live trading environment within weeks of discovering trading.
  5. I’d avoid courses like the plague.
  6. I’d read Mark Douglas earlier on and re-read the book several times. [I still re-read this book.]
  7. I’d wish to recognise earlier that the real battle is in the mind.

I said I had no advice to you who reads this. If you find something of value in the above that’s fine. You can share your own experiences, if you wish.

DISCLAIMER:
The information provided herein is opinion only. Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of investment. You are responsible for your own due diligence. To summarise, we do not provide investment advice, nor do we make any claims or promises that any information here will lead to a profit, loss, or any other result. All materials are for educational purposes only. We are clear in our SYP.

Extreme volatility

Whilst volatility is necessary in trading there are issues with extreme volatility that traders need to consider. The clickable chart below shows one example of extreme volatility with Copper (CUUUSD).

The size of a reasonable stop-loss which is related strongly to account size, is a limiting factor. If your account is say £2000 how much of a hit can you take in one trade like this? Not much. You’d be depending on luck to jump in on this. If your account size is £200,000 then a stop-loss of 1500 pts is a mere itch (for a £1/pt spreadbet). Luck is not a part of this business.

The most important decision a trader can make is ‘not to trade’. The next most important and related decision is how much is an affordable loss.

 

Disentangling currency pairs

Many a new trader will find listen to the news about which currency is doing well or badly. For example the news might say that the US Dollar strengthened, or something like that. Most of these news reports do not say how they know what they are reporting.

Traders would normally be setting their brains against currency pairs e.g. USDJPY, or GBPUSD and so on. This is a ratio of one currency to the other. A ratio cannot be representative of one currency. However, there is a little trick which I referred to in the past. It’s about looking at one of the currency pairs across several. For example if you want to know if the Yen (JPY) is strengthening or weakening then look at several currency pairs for patterns. So – look at USDJPY, GBPJPY, NZDJPY, AUDJPY etc. The chart below (clickable and scrollable) shows that the Yen (JPY) has had a big influence on movement of the pairs.

The Yen de-cloakedThis means that a trader can make an estimate of where price might go based on one currency. Of course if playing AUDJPY (in the chart), a comparison of  all AUD pairs would be useful. It may be that based on such estimates a trader decides to play an alternative such as AUDNZD, after assessing all NZD pairs.

In another scenario after careful assessment, a trader could decide that because AUD is weakening and JPY is also weakening at, then there is likely to be a fall off in volatility – that all important ingredient for taking a chunk out of the markets.